Microsoft cloud revenues rise as phones plunge in its fiscal Q2

Microsoft this afternoon announced non-GAAP holiday quarterly revenue of $25.7 billion, net income of $6.3 billion and $0.78 EPS. Analysts were expecting per-share earnings of 71 cents on revenue of $25.2 billion.

On Thursday, the company said its revenue and profit fell in the last quarter, however, this doesn’t make much of a difference as it made more from cloud computing with the stocks increasing by more than five percent after the release of the numbers.

Phones running on Microsoft’s mobile operating systems Windows Phone or Windows Mobile saw a decline in sales of 57% compared to the year before.

“Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas”, Satya Nadella, Microsoft’s CEO said in a statement.

“One thing we’re noticing is that with anyone who moves to the cloud, there is a real opportunity for us to expand to multiple workloads over time”, said Nadella on the call. The disclosure by Hood implies that the total value of Microsoft’s smartphone business, in terms of revenue, will be approximately $636 million by the end of March 2016. Shares rose sharply in late trading.

To add to its cloud success, Microsoft also recorded a positive jump for its mobile devices business.

This quarter, the company updated this number to $9.4 billion. However, the good performance of cloud was overshadowed by the continued failure of Windows Phones to get any traction in the market, with only 4.5m devices sold.

Microsoft says sales of the Surface Book and the Surface Pro 4 played a significant role in driving overall Surface sales to a 29 percent increase and revenue of $1.35 billion United States dollars. Microsoft’s PC revenue drop was 5% from a year ago, generating $12.7 billion, with the decline in revenue clearly slowing down from Q1 when it was down 17% year over year.

In the fiscal second quarter, revenue for Microsoft’s “Intelligent Cloud” segment rose 5% to $6.34 billion.

Server products and cloud services revenue grew 10 percent in constant currency.

Microsoft reports in three segments, the largest being More Personal Computing, which is the division that produces the core Windows operating system and the Xbox video gaming system.